TV Guidance

These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.

Intel
• INTC-Nasdaq Hold • Price $50.71 on June 25by Benchmark Research We are initiating coverage on the leading semiconductor franchise, which is well into its transition from a PC-centric to a data-centric company.

Today, Intel generates almost as much operating profit from its high-margin data-center business (with a 50% operating margin in the first quarter) and has seen the younger business unit’s earnings-growth rate run between low double-digits and high single-digits. It is difficult to find other megacap stocks with such a compelling story, in our view.

However, when the company recently preannounced upside to its near-term results, it also announced the resignation of its CEO, and revealed it faces several competitive threats, all of which may take the stock back to its historical multiples and keep investors on the sidelines. Hence our Hold rating, and our decision not to offer a target price at this time.

We believe investor sentiment on the media company’s shares continues to reflect uncertainty about a pending corporate-governance lawsuit with controlling shareholder National Amusements, scheduled to begin on Oct. 3 in Delaware. As we have previously noted, we believe the public nature of the dispute creates long-term value risk for shareholders because a contentious relationship with ownership could limit the company’s ability to attract operational expertise and creative talent.

We believe investors are particularly concerned about losing the leadership of current chairman and veteran CEO Leslie Moonves as a result of the lawsuit. We view Moonves as uniquely qualified to lead CBS, given his extensive industry experience and strong reputation in both the creative and business communities.

We maintain a Buy rating and price target of $70, based on 13.3 times our 2018 EPS estimate of $5.26 (unchanged), reflecting a 22% discount to the S&P 500.

Discovery • DISCA-Nasdaq Outperform • Price $28.10 on June 26by Imperial Capital The owner and operator of U.S. and international television networks generated revenue of $7.56 billion, segment operating income of $1.76 billion, Ebitda of $2.20 billion, and cash EPS of $1.49/share over the 12 months, ended March 31. As of that date, the company had $812 million of cash and cash equivalents and $19.2 billion of long-term debt.

We are initiating coverage of the shares with an Outperform rating and a one-year price target of $32, offering 13.9% potential upside to deep-value-oriented investors. In our view, with the stock at 7.7 times enterprise value/Ebitda on the out-year and at a mere 8.0 times our 2019 non-GAAP EPS estimate of $3.53, we believe investors are now much more focused on Discovery’s domestic cord-cutting and cord-shaving issues and may be disregarding the company’s future free-cash-flow composition, which should go entirely toward the paring of debt, most of which was sourced last year to acquire Scripps Networks.

Akamai Technologies
• AKAM-Nasdaq Buy • Price $75.72 on June 26by MKM Partners We attended the Akamai analyst day in Cambridge, Mass., on June 25. Management provided a positive update on its “innovation engine” and its pipeline of new products and opportunities in cloud management, optimization, and security. The firm said it is coming to the end of a period of investment, and that its new products are beginning to contribute meaningfully to the business.

Curtiss-Wright
• CW-NYSE Outperform • Price $118.84 on June 26by Baird Equity Research The company—which makes precision components for aerospace, power-generation, and defense companies—is caught up by the weakness plaguing industrials, and by tariff blowback.

But the fundamental outlook for organic growth in 2018 and 2019 remains favorable, which should translate into record earnings and free cash flow. CW has, for example, exposure to China directly through its power segment, which provides reactor coolant pumps (RCPs) for nuclear plants; orders for those under construction are already locked in through 2019, but Curtiss-Wright will need to replace the volume in 2020. (We have already modeled the replacement.)

With a price target of $149, the shares are a “fresh pick,” following a selloff that has been overdone.

Curtiss-Wright shares trade at 2019 and 2020 P/E multiples of 17.8 times and 17.5 times, respectively, below its five-year average of 18.7 times. And its free-cash-flow yields are at 7.1% and 7.4%, while its average yield is near 5%.

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